WD: Primary Manufacturing Site Flooded in Thailand

Western Digital Corp. on Monday said that it had extended the suspension of its hard drive production operations in Thailand after some of the manufacturing equipment at one of the production facilities was submerged. Halted production means that there will be financial impact on WD’s performance and the global market of hard disk drives will also be affected.

Over the weekend, rising water penetrated the Bang Pa-in Industrial Park flood defenses, inundating the company's manufacturing facilities there and submerging some equipment. At the other company manufacturing location in Thailand, Navanakorn Industrial Park, the park flood defenses were breached on Monday morning local time and water has begun to flow into the park threatening the company's facilities there. All WD employees in Thailand remain safe.

The company's other facilities in Malaysia, Singapore and the U.S. are fully operational. The company now expects that the flooding of its Thailand facilities, combined with flood damage to the company's supply chain in Thailand, will have significant impact on the company's overall operations and its ability to meet customer demand for its products in the December quarter.

In the quarter ending July 1, 2011, WD shipped approximately 54 million hard drives from its facilities in Thailand and Malaysia, with approximately 60% coming from its Thailand sites. The company's Thailand operations source much of its supply of components from local suppliers.

Given the fact that WD is the world’s largest maker of hard disk drives, it can be expected that shortages of its drives will affect the whole market. It is unclear at the moment whether demand exceeds supplies and shortages of hard drives will occur later this year. If WD’s arch-rival Seagate Technology also faces major problems because of flooding in Thailand, then prices will likely go up.

The company will provide further updates on the situation on its investment community conference call on Wednesday, October 19, 2011.